By James Pethokoukis and Azeem Azhar

High tech innovations are driving rapid changes in society. Internet video conferencing is revolutionizing work; a smartphone can be found in nearly every American’s hand; and social media platforms have created their own culture of memes, tweets, and posts. What will be the landscape of these technological changes going forward? And how should our political and economic institutions respond? To answer these questions and more Azeem Azhar joined a recent podcast.

Azeem is an entrepreneur and investor, and the founder of Exponential View, where his podcast and newsletter deliver in-depth tech analysis. This month, Azeem released The Exponential Age: How Accelerating Technology is Transforming Business, Politics, and Society.

Below is an abbreviated transcript of our conversation. You can read our full discussion here. You can also subscribe to my podcast on Apple Podcasts or Stitcher, or download the podcast on Ricochet.

What is the exponential age? And what technologies are driving it?

The exponential age is about
the interaction of the economy with politics. And it’s predicated on the
argument that technologies shape the way that industries structure themselves,
the way that firms compete, the way that labor markets operate, and the way
that the political process then reflects those tensions. And my argument after
a few years of research is that there is a set of new general purpose
technologies, and they too will shape our political economy and our societies
in very, very distinct ways.

The platform we’re most
familiar with is computing and Moore’s law giving us more for less every couple
of years. And then there are perhaps more surprising areas: The field of
biology, and how we interact with the processes and the mechanisms of nature
through genes and through protein engineering; in the field of energy, where
mighty wind turbines and dense lithium-ion batteries are getting cheaper and
better every year. And even in the field of manufacturing where technologies
like 3D printing are improving at such rapid, compounding rates that we can see
them changing the way that we actually build our finished goods. And in all of
that comes shifts in firm behavior, industry structure, economic performance,
and then things that need to get reflected in the political process.

Are the coming technologies going to substantially change our way
of life as these great technologies of the past did?

I mean, in a sense, it’s too
early to tell. I think we can agree that there’s a sort of a concordance around
the fact that general purpose technologies with their wide applicability across
and up and down the economy have really, really significant impacts. Then I
suppose the second question is, to what extent do we really think that
something like computation is a general purpose technology? And one of the
arguments that I would make is that there is an adjustment time that it takes
for companies and managers to develop the know-how to actually make use of
these technologies in very, very useful ways.

And so, we’re 50 years from
the Intel 4004 processor, and still the bulk of commerce is actually done by
people physically walking into retail stores. It’s not done electronically. But
I’m not sure we can be as confident about that fact in 10 years time as we
might have been 20 years ago. Because it has taken time for the technology to
drop in price, for the companies to figure out how to do this, and then for
consumer behavior to also change. But one of the things that I observe in the
book is that the period of time it does take for consumers to latch onto novel
products built on these technologies has been compressing very, very quickly.

Do you have any concern that people thinking technology is going
so fast might actually be some sort of contrarian indicator, and we’re not
entering an exponential age?

I mean, people have certainly
for the last 150 years felt that things are going too fast, and you can go back
to the archives of the New York Times in the 1920s about elevators, and the
turn of the 20th century about girls and boys reading books at night using
electric light and parents being worried about that. I think what’s different
this time is that we can actually see and feel that shift in our real
economies. In 2010, the world’s largest companies were companies of the 20th
century. It was Exxon Mobile and oil companies and General Motors and General
Electric.

And by 2015, all of the
world’s largest companies were essentially IT companies sitting on the top of
semiconductor improvement rates. And so there is a distinct shift and that’s
been reflected by the market. It’s been reflected by the fact that during the
pandemic the companies that grew were the companies that had invested most
heavily in automation and AI. And it was companies like Amazon, not traditional
retailers.

If we’re on the cusp of exponential growth, shouldn’t we see
greater than 2 percent growth in the economy?

We should, theoretically. One
question is whether the gains that we are talking about are being appropriately
measured. And that’s why you see economists like Diane Coyle in the UK, or Erik
Brynjolfsson out of the US saying, “Well, maybe we need measures other
than GDP,” which I think Erik has called GDP-B or something, “that might
capture some of the gains that we are not able to put our hands around.” And
that would certainly be the case in something like some of the biological
arenas where some of these advanced gene therapies might extend lifespans, but
they might not extend healthspans. And so does that really necessarily show up
as a GDP number in any meaningful way?

The other argument would be
that there are many other factors that we can’t control for in the economy. We
don’t necessarily control for the nature and quality of work that people are
doing and the amount of leisure time that is embedded within the economy. And
that might also be valuable. So, I suppose I look at your question and I say,
I’m not confident that we’d necessarily see a return to a 3 percent world in a
kind of post-war excitement. But what I do see is technologies upending
industries in a very, very large degree. And that to me is pretty interesting.

How will that exponential age be powered? You’re talking about a
future of abundance. Where’s that energy coming from?

A large part of it will come
from renewable sources. And I look at the renewables that are on an exponential
price decline, so wind and solar and certain types of battery storage. And
we’re already at a point in 2021 where new renewables are cheaper than fossil
fuels in every part of the world. So we’ve got to that point where it’s
economically attractive to do this. I mean, to get the full energy mix, of course,
we’re going to need more than renewables. We’ll need things like geothermal,
and we’ll need nuclear and we may even have fusion. So we will get to a point
where we won’t be using fossil fuels as our prime mover.

Rather, we’ll have a mix of things that look big and lumpy — like fusion and geothermal — and things that can look very, very decentralized — like wind and community solar and rooftop solar — matched by storage systems that will range from big grids of lithium-ion batteries, to new technologies like that of Form Energy, which has an iron-based battery, through to things like hydrogen being used as storage. But critically that hydrogen will be what is known as “green hydrogen” produced by solar- or wind-powered electricity through an electrolysis process, rather than through a kind of cracking of natural gas or reduction of natural gas. And that will be a zero-carbon hydrogen that will be used for storage and for shipping and for certain types of other transit.

James Pethokoukis is the Dewitt Wallace Fellow at the American Enterprise Institute, where he writes and edits the AEIdeas blog and hosts a weekly podcast, “Political Economy with James Pethokoukis.” Azeem Azhar is the author of The Exponential Age: How Accelerating Technology is Transforming Business, Politics, and Society.

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